1996 (6) TMI 174 - AT - Central Excise

Summary

Issues:
- Eligibility of batteries as inputs for Modvat credit in the manufacture of generating sets.

Analysis:
The appeal before the Appellate Tribunal CEGAT, New Delhi involved a dispute regarding the eligibility of batteries as inputs for Modvat credit in the manufacture of generating sets. The appellants, engaged in manufacturing generating sets falling under Heading 85.02, were availing the benefit of input duty credit under the Modvat Scheme. The Department alleged that batteries fitted with the generating set were not eligible for Modvat credit as they were not used in or in relation to the manufacture of generating sets. A show-cause notice was issued to the appellants to explain why the Modvat credit should not be disallowed.

The appellant's counsel argued that batteries were essential components of the generating sets they manufactured, and the value of the battery was included in the assessable value of the generating set. Referring to a previous case, it was contended that items improving marketability should be treated as inputs eligible for Modvat credit. The Department, represented by the JDR, contended that batteries were not integral to the generating sets and that the sets were marketable even without batteries, which were replaced when exhausted.

After considering the submissions, the Tribunal found merit in the appellant's argument. It noted that the Department considered the battery an integral part of the generating set by including its value in the assessable value. The Tribunal observed that the generating set, though complete, required the battery for operation and marketability. Citing a previous case, the Tribunal held that Modvat credit on batteries should be admissible in similar circumstances. The Tribunal emphasized the necessity of the battery for the generating set's operation and concluded that Modvat credit on the battery should be allowed.

In conclusion, the Tribunal allowed the appeal, stating that Modvat credit on the battery used in the manufacturing of generating sets should be admissible. The decision implied that consequential relief, if applicable, would be granted to the appellants in accordance with the law.